Tuesday, July 5, 2016

Regulatory Capture, Ancient and Modern

From RegBlog:

Until recently, the term regulatory capture seemed stale, a mid-20th
century academic construct incapable of describing the latest
manifestations of special interest influence. At the opportune time, new
empirical work by academics, featured in Daniel Carpenter’s and David
Moss’s bookPreventing Regulatory Capture, refines
the concept to discern and measure capture more accurately, and, in
that matter, engender plausible, contextual solutions. Many of the novel
forms capture now takes and the projected remedies, are covered in the
essays in this RegBlog series. At this point, a brief history
of the concept of capture, in particular its antecedents in political
thought, may inform, if not entertain.

It is possible to find the provenance of regulatory capture in
classical republican thought. Slinking alongside the self-sacrificing
virtue needed to sustain the political community was the concept of
corruption. Corruption, of course, is a vague pejorative encompassing
everything from graft to moral depravity. There is, however, a
particular historical use of the term that contains the key element of
capture, specifically the concern that private interests are intruding
in the public sphere—a boundary has been crossed. In earliest
incarnations, we find it in the classical anxiety over the tyrant, who
swallows government entirely, depriving citizens of access to the public
realm and the chance to participate in political affairs. For Plato,
this confinement to the private sphere of the domestic was the most baleful and dehumanizing effect of tyrannical government. By way of a gloss, Aristotle added
that the tyrant reduces to his own personal self-interest the common
good, which rightly is the product of shared deliberation in assemblies.

The
Roman Constitution, which was unwritten, devised a solution for tyranny
into which the Greek republics invariably descended. As described by
the Greek historian Polybius, mixed government combined the rule of the
one (monarchy), the few (aristocracy), and the many (democracy), by
providing each caste with its own governmental institutions, which
zealously guarded their prerogatives. Patricians composed the senate and
the consulate, while the plebians had the tribunate and the assemblies.
Delayed rather than defeated, tyranny reappeared, but its path charted a
more sophisticated course as chronicledby
Cicero and Sallust. The late Roman republicans honed in on a specific
type of corruption: as Rome expanded, the private financial interests of
the patrician class became parasitic on the government, through
acquiring, at cutthroat prices, land conquered by Roman legions that
should have been distributed to plebians. The civil wars ensued and
ensured the rise of Caesar.

The next phase in the evolution of capture came in the precocious
city-states of Renaissance Italy. In Venice, Milan, and especially
Florence, many of the recognizable accoutrements of the modern state
appeared: centralized administrative bureaucracies and complex
commercial economies. The Florentine Republic, in particular, struggled
to be both broadly participatory, by standards of the time, and
effective. Over the course of the 15th century, governmental
decision-making, though ostensibly open to all citizens selected to take
part in various government councils through sortition (rapid rotation
in office prevented any one citizen from accumulating too much power),
was increasingly confined to a small elite of great merchants and
bankers. Foremost among them were the Medici, the bankers who, according
to Italian diplomat and political philosopher Niccolò Machiavelli, acquired
outsized political power via private means—essentially through an
extensive network of loans and private favors—to win partisans, who
would in turn serve in public office so that the Medici need never
serve. So successful was this subversion of state that Lorenzo de Medici,
while a private citizen, was given free rein to negotiate treaties with
foreign powers. More relevant to our purposes, Lorenzo was granted special tax concessions in 1482 “to preserve the public interest by preserving Lorenzo,” the official documents intoned.

Solutions were offered. Machiavelli was an early proponent of transparency. Francesco Guicciardini, a historian and statesman, suggested shoving the grandi
into a powerful senate, in the faint hope that blatant oligarchy might
rise to aristocracy given the chance. States, as we all know, can go
backwards rather than forwards. What was a dynamic, prosperous
city-state, weakened by incessant war, became a patrimonial
state, the inheritance of the Medici, who suborned the machinery of
state to serve their family interests and those of their courtiers.
Banking and the wool industry withered. Patrimonialism may well be the
culmination of capture....MORE